Ryan: QE3 is a bailout for Obama

posted at 1:31 pm on September 16, 2012 by Jazz Shaw

There has been no end of distracting topics for the media to focus on over the last week, but under the covers, the economy is still there and the cliff lying ahead of us hasn’t gone away. Somewhat overshadowed by foreign policy discussions was the decision by the Fed to launch into QE3. (For the few of you just joining the program, that’s the third stage of “quantitative easing.”) The lower half of America’s Comeback Team didn’t miss it, though, and called it out for what it is.

Rep. Paul Ryan (R-Wis.) said the Federal Reserve’s latest policy shift amounts to a “bailout” of the economy under President Obama.

Speaking at a campaign event in Oldsmar, Fla., Mitt Romney’s vice presidential candidate lambasted the Fed’s recent decision to try and do more to boost the economy as “sugar high economics.”

So what is the future Veep talking about? We’ve already had two rounds of “easing” so far, right? Why is this different? Well… it is.

On Thursday, the Fed announced it was embarking on a third round of “quantitative easing,” in which it would buy up $40 billion of bonds every month. But in a new move, the Fed said this time it would be continuing the purchases until it was satisfied with the rate of growth in the labor market — the past two rounds of easing were set at a specific volume of purchases. The Fed also said it expected to keep interest rates near zero until mid-2015 (it had previously predicted rates would stay low until the end of 2014), and that it was willing to do more if it found it necessary.

Read that last part again. We’re not just talking about opening up the candy store for a few hours here. We’ve done that before, but investors know that if they’re going to have to cover a shortfall a few months down the line, they’ll remain cautious if the free market isn’t going to continue the surge. But this is essentially the same as saying that it’s party time for the next few years so the sky is the limit. This is a sugar rush. But it’s one where the hangover doesn’t come due for a long time.

How long does it need to last? Till the first week in November. After that the party is over anyway. But if it pumps up the numbers on Wall Street and gets people in a mood to toss cash into the ring, it bumps up the metrics. I know what you’re thinking here… the Fed is beyond politics and I’m just being cynical. What can I say? I’m suspicious by nature.

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So why are the traders on Wall Street excited? Why is the Dow going up?

Is QE3 just smoke and mirrors? A con by the Fed?

slp on September 16, 2012 at 3:00 PM

Because inflation pushes up stock prices. Short sighted on their part, but nothing new.

GCM on September 16, 2012 at 3:10 PM

It’s not really short-sighted at all. The market reacts to news, and when it’s told that $40 billion per month of bonds will be purchased and that money will enter the system in relative perpetuity, it knows that the options for where that money can go to generate an acceptable return are further limited. That money will find its way into the market, and with a finite number of shares to purchase, indexes will go up and up. Barring any major shocks to the economy, foreseen or not, the Dow is headed in a straight line for 15k and beyond.

prove yourself wrong. Respectfully, quit whining and help out. If you go over to Romney’s site and sign up, they can get you phone-banking into swing states FOR FREE. All you need is a little time and a willingness to chart with your fellow countrymen for about 30 minutes per day. Try it; you’ll be surprised at the responses you get from sympathetic citizens who hate this assshole.

There are (at present) approximately 24 commenters on this thread. If each one (except the troll ass-toner-2) contacted 10 people each day for a week that’s 1,680 folks. It is easy to see how this will grow geometrically.

I spent 35 years as a soldier and never once “whined”. I have been working for Romney’s election and I’ll continue to do so. We’re not talking about the level of participation by the faithful, we’re talking about a dynamic that is getting less positive each day. I hope it will turn around but cheerleading isn’t going to turn the rudder, it’s going to take forceful leadership and strong, detailed policy articulation by Romney and his running mate.

I guess the opinion you’re opposing is “Since Palin and Ron Paul aren’t running, it is recommended to choose Romney as the lesser evil of the two incompetent big-government honchos.” My humble position on it is that if I am destined to go off a cliff, I’d rather not do it in handcuffs.

Per Bernanke the Fed hopes that inflating the value of assets like houses or 401K balances (creating a bubble?) will make people feel “richer” and thus more likely to spend their money.

He’s probably right that many people will react that way. One thing the last housing bubble showed is that there are a lot of people inclined to use the equity in their homes as a piggy bank to support their lifestyle.

But hopefully most people will recognize the scam for what it is and will wait for, or better yet work for, a real solution which will require changes in government fiscal policy rather than just doubling down on policies that are not working.